Two former employees awaiting conviction for their roles in a million dollar fraud program that led to the collapse of the Reagor Dykes Auto Group are expected to testify against the dealer’s CEO in its bank fraud trial in October.
Shane Smith, former CFO of RDAG, and Steven Reinhart, former director of legal and compliance for RDAG, are listed as potential witnesses in the October 12 trial of Bart Reagor in federal court in Amarillo.
Reagor is accused of diverting more than $ 1.7 million of a $ 10 million loan from the International Bank of Commerce to his personal bank accounts for personal expenses.
IBC distributed the loan in 2017 and 2018 in two tranches of $ 5 million to D and R Acquisitions, LLC, an informal holding company affiliated with RDAG.
The indictment alleges that Reagor deposited more than $ 766,000 from the IBC loan into his personal account at Prosperity Bank as of July 2017. And in February 2018, he reportedly deposited $ 1 million from the loan into his personal bank accounts.
The dealership filed for bankruptcy in 2018 after Ford Motor Credit filed a lawsuit against RDAG accusing the dealership of fraud.
Smith and Reinhart were among 15 RDAG employees who pleaded guilty to their roles in the Ford Motor Credit program following a criminal investigation in federal court.
Smith pleaded guilty in June 2019 of being guilty of a wire fraud conspiracy over his role in orchestrating a check kiting and floor dummy program designed to defraud Ford Motor Credit of millions of dollars.
Reinhart pleaded guilty in February of having committed a charge of negligent assault.
The two are released on bail and are due to appear before Judge Matthew J. Kacsmaryk on December 21, according to court records.
Meanwhile, a federal grand jury returned in April and Charges against Bart Reagor, charged him with bank fraud on two counts and with false statements at a bank.
Reinhart is expected to testify about the IBC working capital loan made available to D and R Acquisitions and his review and understanding of the purpose of the loan.
Court documents show that Reinhart will testify that he was unaware that Reagor diverted the IBC loan to Reagor’s personal bank account.
Smith is expected to brief the jury on the RDAG’s working capital needs and the company’s weak cash position following a floor plan review in March 2017. Jurors are expected to hear Smith’s testimony about Reagor’s alleged instructions on the distribution of the International Bank of Commerce‘s working capital loan.
In support of Smith’s testimony, prosecutors are expected to provide records including emails between Reagor, Smith and other RDAG employees and excerpts from internal meetings on January 31, 2018 and July 11, 2018, according to one filed by the prosecutor Exhibition list.
One of the emails from September 22, 2016 has the subject: “Fwd: Overdrawn accounts.”
Smith is also expected to testify through a chain of emails in June 2017 between him, Reagor, and Rick Dykes.
On September 14, Reagor’s attorney filed a motion to dismiss the indictment, saying that it was not a criminal offense, specifically not that he âengaged in a series of fraudulent acts or transactions that Mr. Reagor committed for the purpose of ‘some scheme or skill to perform ‘âclaim. To cheat IBC. “
According to the indictment, Reagor is charged with misleading IBC by failing to disclose and hiding the fact that he intended to divert his business loan to his personal account.
âThe loan agreement prohibited Reagor and others from diverting loan proceeds to their personal bank accounts, and IBC would not have approved the loan had Reagor and others notified IBC that a portion of the loan proceeds would be diverted to Reagor and others’ personal bank accounts and for personal expenses used.
Reagor’s attorney wrote that the indictment does not indicate what Reagor is alleged to have omitted about the use of those funds by himself and his company.
Instead, Reagor’s attorneys referred to the Reagor-IBC deal as a “potentially … imperfect deal” in their motion.
In response to the motion, federal prosecutors asked the judge to deny the dismissal, saying the indictment against Reagor was properly constructed and that his lawyers misunderstood the definition of misrepresentation in relation to the Bank Fraud Act.
Prosecutors argued that an affirmative statement of fraud was unnecessary to charge someone with bank fraud.
“A plan can be fraudulent, even if no false facts are presented,” said a response from the prosecutor. “The fraudulent concealment of essential facts can also be actual fraud.”
Prosecutors further argue that the other arguments of Reagor’s attorney are not supported by the case law.
A decision on the application has not yet been made by Friday.